Europe Probes Wood Energy Market, Climate Impacts

U.K. efforts to meet climate targets by subsidizing wood burning at power plants instead of relying on lower-carbon energy sources are being probed by European officials for their impacts on American manufacturers and on the environment.

The U.K. is planning to use billions of dollars in climate fees imposed on electricity customers to help two large coal power plants switch to wood fuel, millions of tons of which is already being produced every year using trees from southern U.S. states.  It’s also supporting construction of a third power plant that will use similar fuel.

The expanding use of large-scale wood energy by Britain and other European Union countries is releasing more climate-changing carbon dioxide than burning coal.  Because wood is renewable, a loophole allows energy from it to count as clean under energy laws designed to help Europe satisfy its international climate commitments.

Concerns about the climate and environmental impacts of the U.K.’s support for large-scale wood energy will be looked into as part of the new investigation by European officials, but it will focus primarily on the business and economic impacts of the subsidies.

Companies that produce paper, packaging and some types of wood compete for raw materials with wood pellet mills, and they complained to European regulators about the effects of the U.K. subsidies, triggering the investigation.

While the American Forest and Paper Association “doesn’t oppose the export of wood pellets to Europe,” spokeswoman Jessica McFaul said in an email, “we do oppose subsidies that distort the wood fiber market in the U.S. South.”

At the center of the European Union’s investigation is the Drax Power Station and the U.K.’s plans to provide £1.3 billion ($1.9 billion) to help meet fuel costs and finance the conversion of one of the six boilers to burn wood pellets.  Two of the power plant’s other boilers are already running entirely on wood pellets, also financed by the U.K. government.

The three units are collectively projected to burn wood pellets made from about 15 million tons of trees every year, with more than 60 percent coming from the U.S. South.  That’s expected to produce more than 3 percent of the U.K.’s total electricity needs.

The investigation is being undertaken by the European Commission, which is similar to administrative branch of the U.S. government.  In an 18-page memo to the U.K. released this week, the commission said it “has doubts” about whether the cumulative demand for wood pellets by the U.K. conversion projects could be satisfied “without undue market and trade distortions.”

The final findings from its investigation could shape the future of a fast-growing industry that’s funded by European utility customers on the basis of an unscientifically rosy view of wood energy’s potential impacts.

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